Fed Advisor: Warsh May Need Five Years to Shrink Fed's Balance Sheet

Odaily News Federal Reserve Chairman nominee Kevin Warsh aims to significantly reduce the Fed's $6.6 trillion balance sheet. A top financial economist suggests he may need more than one term to accomplish this task. Darrell Duffie, a professor at Stanford Graduate School of Business and a long-time Fed advisor, pointed out in a new paper that if the Fed wants to substantially reduce its influence in financial markets without causing severe stress, reforms are necessary, including overhauling bank liquidity requirements and redesigning the payment system. Once Warsh is confirmed by the U.S. Senate, he could implement some reforms immediately with the support of his colleagues. Duffie stated that other reforms might take up to five years, meaning the effort would extend beyond Warsh's potential four-year term as Chairman. (Jin10)